Four Stages of Competence Investing In Real Estate to Make Money

Being competent is crucial in all areas of life and that goes with real estate investing. As you grow in your learning, you will go through stages of competence which is normal. Your goal is to have your investing be second nature, as in the four stages of competence.

The four stages of competence are: 

1. Unconscious Competence (Right Intuition)
2. Conscious Competence (Right Analysis)
3. Conscious Incompetence (Wrong Analysis)
4. Unconscious Incompetence (Wrong Intuition)

It is important that you understand the four stages of competence in your life to know where you are and how you can get to the next stage in your real estate investing business.

The only way to master anything is to progress through each stage to the fourth stage where you have mastered your skill or craft.

Every investor goes through the four stages of competence. The key is to continue progressing through these stages until you have made it to the final stage.

Mastery.

Let’s go through the four stages of competence and break them down piece by piece so you can understand your journey with investing in real estate.

Stage One: Unconscious Incompetence

The person in this phase does not understand or know how to do something or know that “something” actually exists.

The saying “You don’t know what you don’t know” applies to the people in this stage. It can even be that the person knows what they don’t know but chooses to stay ignorant of the skill.

To move past this stage, the person must recognize their own incompetence as well as value the new skill before moving on to the next stage. One can move past this stage more quickly with the desire to learn and willingness to spend the time developing the new skill.

Stage 2: Conscious Incompetence

In this stage, knowledge of the skills existence and the understanding of its necessity is recognized but the ability to carry out the skill is lacking.

Once the individual knows they are missing something in their skill set, they can put forth the effort to learn the skill.

In learning the new skill, as in learning anything, trial and error will take place. Failure will lead to success as the individual continues to train and learn the new skill.

Stage 3: Conscious Competence

The individual in this stage understands the skill and is able to apply the skill with limited failure.

Even though they know the new skill, it takes the individual to have considerable concentration to perform the skill well.

The skill may be broken down into smaller steps to make the task or skill easier to manage.

It takes conscious effort to execute this new skill and apply the right actions to be successful. In this stage of the four stages of competence, you are know what to do but it is not yet instinct.

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Stage 4: Unconscious Competence

This individual has had so much practice with the new skill that it becomes second nature and can be performed easily and with limited concentration.

One can even perform another task at the same time because of muscle memory, complete knowledge, and practical experience with the skill.

“If you can’t explain it to a six-year-old, you don’t understand it yourself.” –Albert Einstein

Think of professionals who have played their sport for 5, 10, or 15 years perfecting their skills.

Professionals like Michael Jordan, Lebron James, Tom Brady, Tiger Woods, Warren Buffet, Bill Gates, Jim Rogers, Donald Trump, and others who are the best at what they do.

They have studied, practiced, corrected their mistakes, learned from the past and others, and now are masters of their skill.

This is stage is not just for professional athletes.

It can be for musicians, writers, carpenters, cabinet makers, police officers, stock investors, realtors, etc. In this stage, a person has devoted hours and hours to hone in their skill.

It takes thousands of hours of learning, practice, correction, and application for a person to master a skill.

Once a person has mastered a skill, things come as second nature and actually feel like common sense to the person.

Real Estate Investor / Stage One: Unconscious Incompetence

Most people in this stage have the desire to buy their first rental property but no knowledge of how, what, when, or where to buy a property.

Even though they have the desire, they are unaware of what is possible with real estate investing (or any other industry), so typically their nature is skeptical.

Recently I was on a phone call with a potential real estate coaching student who was very skeptical and pessimistic about real estate investing.

He had seen many friends and family members by one or two properties, have a horrible experience and give up in frustration because they didn’t know what they were doing.

This caused him to think that no one could ever make money from real estate investing.

I could get offended, or take a step back and ask where this is really coming from.

He was saying he was skeptical and also cynical because if this really were that easy, wouldn’t everyone be doing it? In his mind.

Every once in a while, I get asked this question, “If you are making so much money in real estate investing, why do you teach it?”

Even though this is one of the most cynical questions you could ask, I don’t get offended. I answer the question with another question.

“Who do you want to teach you how to invest in real estate, someone who is not successful investing in real estate and who does NOT have a successful business?”  

This questions really drives home the point that you should only learn from those who are successful and are willing to give you their time to help you get to where they are.

Honestly, this is the reason why I coach others to invest in real estate. I am fully blessed to live the life of my dreams and I feel lead to give back to others the things I have been blessed with.

With my real estate investing, I could literally go fishing every day, binge watch Netflix, or really, anything else? I don’t need to do anything.

In fact, I make ridiculously more money investing in real estate than I do from anything else. It’s not about the money. It is about helping others become successful.

This is why I write books, have a podcast, write investing articles, and coach real estate investing.

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I bring this up because you have to analyze where people like this are coming from. And they are just skeptical! They’re cynical, and they doubt.

And they also have friends who don’t believe as well as stoke that unbelief and skepticism. My desire is to take people from the stage of unconscious incompetence all the way to the conscious competence stage.

The people in this first stage are very skeptical though. They are skeptical because they do not have the knowledge of what is possible with investing in real estate.

They don’t know what they don’t know.

They are even stuck in their lack of knowledge AND do not want to get past this stage to better themselves. This is why knowing four stages of competence helps them to progress to the next level.

There are many others who are stuck in this stage that could be holding you back from greatness.

They do not want you to leave the group, to break away and try something different. When you do, it puts a spotlight on the fact that they are not doing something new.

There is a saying, “Misery loves company.” They want you to stay with them because it validates their understanding, or lack thereof in real estate investing (or anything else).

This is with anything in life.

They are unaware and they doubt and try to make you second guess if this is something you really want to go after.

These people are sometimes in your life as coworkers, friends, maybe even your spouse.

You have a choice when you encounter these nay-sayers. You need to ask yourself this question:

“Do I go back and do what I have always done, or push through and prove them wrong and prove to myself I can go in a different direction?”

If you are this person in this stage right now, I want you to ask yourself: Do I have a reason to be cynical, to doubt?

Or should I be opening my mind and listening, perhaps someone else knows something I do not know?

Only you can make that decision if you are in this stage. Your goal is to move onto the next stage of the four stages of competence.

I will say that a lot of the time, when it is new and money is involved, it can be too good to be true.

We have all been taught to think that way.

This is a good perspective to have.

You don’t want to be swindled out of your hard-earned money. But, do not make the mistake of automatically shutting the door instead of investigating for ourselves whether it is or not.

Real estate investing has been around ever since the beginning of time.

People owned lands and properties since then and they will in the future. Rental properties have been around almost as long.

People always will need a place to live and there will always be an investor like you who will be glad to accept their money to let them live in a property you own.

Real Estate Investor / Stage Two: Conscious Incompetence

One student I was coaching started in this stage, as most do.

My coaching student was young and very nervous about how he could actually quit his job by investing in real estate.

He and his wife just had their first baby boy and he was exhausted from lack of sleep.

He knew it was possible to make money investing in real estate rental properties and have seen it done in the past by others.

The thought of being able to provide for his family without working was a way that he could spend more time with his family.

Without a J.O.B., he would be able to coach his son’s little league games, be at home teaching his future children how to read and write, AND have the time to serve his church and his community.

He, like others in this stage, is aware that there is something they do not know but they are aware it is possible.

Maybe a friend of theirs is starting to make money with rental property investing. People in this stage know that it is possible but you do not know how to start, let alone build a successful real estate rental business.

This is when you begin your search.

Maybe you listened to my podcast or saw my youtube videos about investing in real estate.

Maybe you start with something small, like learning how to get out of debt, because you have seen it been done and you now want to know how you can make money work for you.

Those in this stage are in a great position to take advantage of the great things that are out there.

You are not just unaware, you are now aware of what is financially available to you, you just are incompetent to how it works. Again, this is a great place to be!

This means you are open to learning.

You’ve discovered that investing in real estate is possible and there are people like me who have mastered the game of passive income and want to share it with you.

You are aware that people invest. Period.

You just don’t have the nuts and bolts to make it work for you. Yet.

I’ve been in this stage before, many times with many different subjects. It is as if there is SOOO much to learn and so little time.

This is when your desire is to consume as much free content as you can! Yes! This is a great place to be.

This will get you started down the right path AND help you to know if this is really something you want to invest your time and money in.

Take all the free content you can to learn!

Just like my free investing course that I offered to you at the beginning of this book. To get it, use the link: www.masterpassiveincome.com/freecourse

This stuff is not taught in schools and is NOT common sense. This is hard learned lessons of what is good, bad, and how to invest in real estate to change your life.

This will also start to satisfy your curiosity.

You will get familiar with the terms, ideas, and principles of real estate investing.

BUT if you dive in to the deep in of the pool, you may make some mistakes because at this level you are not an expert yet.

This is what I did. I’ve lost tens of thousands of dollars doing real estate the wrong way. I did not continue to learn, get an online real estate investing course, or get coaching.

I should have done all of these before, or even after I started investing. But I didn’t.

Sometimes at this level, you could get caught up in: “I knew this wouldn’t work” when you make an initial mistake.

Even though it was tough. I didn’t lose sight of the prize of a life without a J.O.B. I could have given up but I pushed through it.

But remember: You are still only at the free information! You are only at stage 2!  It can be confusing with all of the ideas out there.

Be aware of negative voices – whether it’s of others’ or your own.

And be aware that this is the level where you will make mistakes because you are determining different styles and different opinions.

What’s important at this step is to start learning and never stop.

For example, when I first started investing in real estate, I had the desire but not the knowledge.

After taking a $1,000 2-day seminar on everything real estate investing, I decided to make a go for it.

The seminar company was charging $30,000 for an “rental property course” that I could not afford, nor had the desire to spend that much money.

I knew I needed knowledge and training but knew that the most I would spend was $5,000 for coaching.

Even though I didn’t get into that coaching, looking back, it may have been a good investment. By doing it myself, I made so many mistakes which cost me loads of money.

Thinking of other ways to invest in real estate, I tried flipping properties. Even though this was good money, it did not allow me the freedom that I wanted to have.

If I didn’t flip a property, I wouldn’t make any money.

If I wasn’t buying my next property, I would not have one to sell.

This is when I made the decision that lifestyle design and living the dream life was my goal.

After trying just about everything, I realized that rental property investing would be the only way that I could build wealth AND have a business that works without me.

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The beauty of real estate investing is that it is an automatic business that runs itself. If I don’t work, it still works for me.

For example, after I quit my job, I went on a 6-week trip driving through Japan with my family.

The year after, I took my family on another 6-week trip. This time it was through 13 counties in Europe. England, Scotland, Ireland, France, Germany, Switzerland, Israel, and many others.

This was all possible because of my rental property business. I work for 3 hours buying one property, then my business takes over and does all the work.

This is how YOU can live the dream life! Build and automatic business that runs without you.

Truthfully, there is a right and wrong way to invest in real estate. When you are in this stage 2, focus on learning.

Find someone who is already where you want to be. They have already done all the hard work. Now all you need to do is follow their lead.

Real Estate Investor / Stage Three: Conscious Competence

At this level you are willing to try and are actively looking for solutions. You may have tried investing in real estate and maybe have had some success.

You may have one, two, or three properties and are looking to become a serious real estate investor.

Now you are ready to be shown how to turn your one or two rental properties into a successful business.

You look to someone else who has lived through this game for a while and now has the short cuts and tried and true strategies to learn from.

They are able to help you build your business large enough to quit your J.O.B.

You do not have to make the same mistakes, that I made. You don’t need to lose tens of thousands of dollars in your business to find the right way to do it.

All you need to do is be given the direction to go, given a plan, be guided down the right roads, and save yourself all the headache.

This is the time for you to get coaching or find a mentor. Someone who is already where you want to be AND show you how to get there.

Honestly, at this level, you are at the point where you are willing to pay for information. Not just information, but coaching and actual training.

It is no longer a matter of “Does this work?” for you. You are already there. You know it works. You have successes. You are ready for more.

It is a matter of: “How do I make it work BETTER and FASTER?”

When you are open to additional training, that is what you are looking for – how to do it better and faster.

But at this level, impatience may kick in. It’s working but maybe not as fast as you want. The problem with that is you start at the bottom of the ladder again to stage 1.

If you start thinking, “Maybe I should learn something new – maybe now it’s stocks”. Now you are back to the free info, and you have to make your way all the way back to stage 3 (which is where you already were at!)

Every time you switch – you typically go back to the bottom of the ladder.

stage 3 is NOT about giving up or getting impatient when it doesn’t work out like you thought. Typically, businesses see success after 5 years of business or thousands of hours to become an expert at a craft.

This is where you need to hunker down and say “I am close!”

Seek out people and methods who are doing it BETTER and FASTER than you are at this stage and LEARN from them. Stick to your plan – do not let impatience draw you away from your game plan.

The healthy version is saying how do I make THIS work better and faster?

Real Estate Investor / Stage Four: Unconscious Competence

This mastery can be applied to investing in real estate as it can to anything else.

This is the level of MASTERY. At this level, you have had success and are confident. This is where it becomes second nature to you.

Every month, I make tens of thousands of dollars in my real estate investing.

This amount grows as I buy more and more properties. Remember, this is also without ANY work on my part. My business is an automatic business that runs without me.

Imagine making tens of thousands or even thousands of dollars each month without working…

Wouldn’t your life change in amazing ways if you had an extra $1,000 a month in passive income?

My first $1,000 in passive income was life changing for me. I was no longer Just Over Broke (J.O.B.). I had breathing room in my budget. The success bread more success.

Now, years later and 35 properties (currently), I have an automatic business that makes me tens of thousands of dollars a month. This is because I have mastered passive income.

Those in this stage are not as emotional as they once were in stage 1. You win some, you lose some. You have some evictions, and you have some big pay days.

In the end, a real estate business is going to be NET positive at the end of the year.

The issue is most people do not allow enough time to let themselves get to this level. Some do not have the patience to attain it BUT we all want the RESULTS of mastery level.

Most people want a 4-yr degree in the first year. That makes no sense. You would never go into college and say, “If I can’t get this degree in year one this doesn’t work and I want my money back.”

If you flunk 1 or 2 classes you do NOT drop out and give up. You hire a tutor, you study and put more into it, and dissect the problem and how to get over it to get the degree.

Investing in real estate is no different: You need to move up all four stages to get really confident and gain mastery level.

You cannot substitute time for this. You only become a master over time and from doing something over and over again.

And most people don’t stick with it and put in their thousands of hours so that they can get so good they don’t need to think about it. 

Where are YOU at in the four stages of competence?

Go back through all 4 stages… and see where you are currently at. If you are at stage 1 or 2, sign up for my free course.

Get started.

For those who are at stage 3, get serious about your trading. Consider joining a coaching program or get a higher course.

Or if you aspire to be at 4, you only get there by putting in the time and honing in your skill. Even at this level, you NEED to have a coach and community to stay accountable, to tell you when you need a course correction.

I would LOVE to know:

Where you are at in these stages of learning?

What are you going to do to move yourself up through the stages?

Leave a comment below.